Fitch Revises Camargo Correa's Outlook to Negative; Affirms IDR at 'BB'

Fitch Ratings has affirmed the Issuer Default Rating (IDR) and outstanding debt ratings of Camargo Correa (Camargo) and its special-purpose vehicle CCSA Finance Limited as follows:

--Foreign currency IDR at 'BB';

--Local currency IDR at 'BB';

--National Scale rating at 'AA-(bra)'.

CCSA Finance Limited

--US$250 million senior unsecured bonds due 2016 at 'BB'.

CCSA Finance Limited is a special-purpose vehicle wholly-owned by Camargo and incorporated in the Cayman Islands. Its debt is unconditionally guaranteed by Camargo.

The affirmation of Camargo's ratings follow the company's recent decision to acquire Votorantim's 50% stake in VBC Energia for BRL2.6 billion. This transaction, which is expected to be completed by Feb. 19, 2009 will require a cash payment of BRL1.9 billion. Following the conclusion of the transaction, Camargo will own 100% of VBC Energia, which in turn owns 28.6% of the Brazilian power holding company, CPFL Energia.

While this transaction will be modestly leveraging for the company, Camargo's credit profile was considered strong for the rating category prior to this acquisition. The assignment of the Negative Rating Outlook reflects concern about the slowing economic environment in Brazil and the potential negative impact it could have on the company's businesses during 2009, particularly in its cement, homebuilding, and engineering and construction businesses. This could result in the company's net debt-to-EBITDA ratio exceeding 3.0 times (x).

The affirmation of Camargo's ratings takes into consideration the company's long track record of successful acquisitions such as Loma Negra, Tavex, and Alpargatas Argentina. It also factors in Fitch's expectation that the company will be able to secure long-term financing to fund the VBC Energia transaction. Camargo's credit ratings continue to be supported by its diversified portfolio of operations, adequate market position in the industries in which it participates, and strong liquidity relative to leverage. The ratings take into consideration the high correlation of Camargo's core businesses of cement, engineering and construction, textiles and footwear with general economic conditions of countries, in which it operates in, but especially Brazil and Argentina.

Structural subordination risk associated with a holding company structure is mitigated by Camargo's financial performance, manageable levels of debt at its subsidiaries and strong dividend flows from core operating companies and minority equity stakes. During the 2005-07 period, the dividends flow amount transferred to Camargo totaled BRL1.3 billion. One of the main challenges Camargo faces in the next years is to continue receiving strong dividends flow.

Camargo's FYE 2008 results are expected to be released by the end of March 2009. At June 30, 2008, the ratio of total-debt-to-EBITDA and net-debt-to-EBITDA was 3.0x and 1.5x, respectively, versus 3.3x and 1.6x at the end of 2007. Meanwhile, EBITDA-to-interest expense was 2.2x at June 30, 2008 versus 2.5x at the end of 2007. Camargo has had a history of maintaining large cash balances on its balance sheet in order to facilitate acquisitions and mitigate market volatility in a scenario where access to debt markets becomes limited. At June 30, 2008, Camargo had BRL3.03 billion of consolidated cash and marketable securities of which about BRL1.9 billion, approximately, was held at the holding company - some of which is held offshore. Camargo's total consolidated debt was BRL$6.2 billion as of June 30, 2008. Consolidated short-term debt accounted for about 24% of total debt.

Camargo Correa is one of the largest private industrial conglomerates in Brazil generating BRL11.8 billion of net revenues and around BRL2.1 billion of EBITDA for the last-twelve month period, ended in June 30, 2008. Camargo is a holding company with full ownership interests in cement, engineering and construction companies. Control position in homebuilding, textiles, footwear and sportswear manufacturing companies. Equity interests in energy, transportation (highway concessions) and steel businesses. A large proportion of the company's equity investments are in companies that are publicly traded and liquid. The company is controlled by the Camargo family through their direct holdings in Participacoes Morro Vermelho, which in turn owns 100% of Camargo.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.